Tuesday, May 22, 2012

I think we have seen the tipping point at which Obama's reelection prospects begin what could be a relentless decline. His policies were arguably the main reason the economy has done so poorly in recent years, and now we begin to see that the real problem is his total lack of understanding about how economies and markets work, compounded by an amazingly inept campaign. Romney should have no trouble convincing a majority of voters that he will be a better steward of the economy. Jennifer Rubin, an outstanding political observer writing for the Washington Post, makes this chilling point in her blog post today:

I confess that not in my wildest dreams did I imagine President Obama’s campaign would be so awful. Oh sure, I knew it would be “awful” in the sense of going negative, being disingenuous and blaming everyone for his failings. But I was taken by surprise by how “awful,” in the sense of incompetent and ham-handed, it has been.

Virtually every gambit and issue (“war on women,” gay marriage, and now Bain) has gone haywire, arguably inflicting more damage to Obama than to Mitt Romney.

Either Obama is preying on the public’s ignorance in a transparent effort to distract them from his rotten record, or he’s economically illiterate, soaked in the rhetoric of the left with no real feel for the American economy. (These are not mutually-exclusive explanations.)

Obama is at best an empty suit and ignoramus when it comes to our economy.

This chart of Obama's chances of winning reelection needs no further explanation:

24 comments:

And he is getting no help from Clintonites. Daley has been feeding the WaPo unflattering pictures of the Lightworker on the deficit negotiations and the use executive power. Robert Reich recently told young people, a core O voting block, how bad things are for them. Mort Zuckerman has been bashing O's economic policy for 2 years now. Now we have Ed Rendell cutting the Bain attacks off at the knees with the help of Cory Booker, who must want to keep his political future intact. It is almost as if people clearly loyal to Bill Clinton want to make sure he stays the only re-elected Democratis Presdent since FDR, and not cede that title to a man everyone knows the Clintons hate...

That Obama is ignorant of how markets and the economy work is a statement of fact, not political bias. That's how I see it as an economist and an investor. If he is replaced by someone with a better understanding of markets and the economy then we will all be better off; that is a statement of belief.

With the US and European economies in a tailspin along Main Street and the southern flank of Europe, Pres Obama is unlikely to win reelection -- what is more likely is a Mitt Romney administration -- my guess is that Romney is a closet banker who will eagerly repeal Social Security, Medicare, Obamacare, and all entitlements, in favor of expanding and committing US armed forces to fighting wars in Iran, North Korea, Syria, and Africa -- all that means big defense spending and wartime dividends for investors -- a return to the draft for everyone without a college degree through age 35 would also eliminate unemployment while returning military wages to subsistence standards -- the future looks bright for accredited investors and those earning premium wages greater than $250,000 annually!

Billy Billy Billy...get back on your meds, please for the sake of us all.

I can assure you that Mitt Romney has no intention of repealing SS, Medicare and launching wars against North Korea, Iran, Syria and/or whoever.

What he will do is: 1) replace ObamaCare with something else after it is gutted by the SCOTUS. His principal economic advisor, Glenn Hubbard, has written a book on free market healthcare reform. Romney's plan will look alot like what's in that book. 2) reform Medicare and SS, principally by means-testing and reducing benefits 3) the only "pro-banking" thing Romney will do is to tinker/repeal the 3-4 most damaging provisions of Dodd-Frank 4) halt any new EPA rules pending from the Obama administration.

I hope he does alot more - like abolish the TSA - but I doubt it. Furthermore, I can state with absolute confidence that Romney will studiously avoid armed conflict with any nation, unless US soil is attacked.

Hi Donny Baseball, keep in mind that TSA was a Republican creation with the "secondary" mission of checking passengers at airports -- the TSA's "primary" mission is something very different...

The Republicans have no intention of abolishing the TSA -- and yes, the Republicans are puppets of the military industrial complex, just like the Democrats -- the US will remain in a permanent state of war with troops stationed overseas through the coming century and beyond (assuming Federalism doesn't go broke in the meantime)...

WilliamYes, the TSA is a Republican created disaster, much the same way that Vietnam was escalated by Democrats and Japanese-American citizens were interned by The Democrat's cherished icon, FDR. But that is a side issue, Romney can rein in the TSA by cutting down funding rather than excising this pox upon a free society. There is zero evidence that Mitt Romney is a war-monger...zero. Finally, all else being equal, which it clearly is NOT as our host has pointed out, Romney is preferrable in that he has no reliance on a cult of personality. Obama is a pure CoP leader and thus, despite his current unpopularity, is Very dangerous to individual liberty.

Dr. William, please... There isn’t a shred of evidence or reason to believe that Romney is a war monger. There is lots of evidence he isn’t going to be radical, and not being radical from my perspective maybe his undoing. The U.S. needs radical supply side reform.

Obama believes that central planning from a large dominate government is the best form of economics, as it seems some commenters do. Certainly many people believe this, I know some. They believe crony government is how business is best done and actually believe that regulators can regulate that which can’t be regulated. It has never worked and it isn’t working now and it will never work.

Something better be done or get started soon. There are fewer and fewer workers per non-worker and the net present value of liabilities is something between 60 and 100 trillion dollars depending. And none of these calculations ever take into account FHA, Amtrak and the post office and any other contingent liabilities I am not aware of.

Hi Squire, nothing is going to be done to improve employment in the US -- the reality is that American workers are overpaid and easy to replace -- that includes anyone with less than world-class skills -- I am predicting that real working wages for Americans earning less than $250,000 annually will decline by at least half in the next 30-50 years or less. The reality is that highly motivated and proven workers can be hired for less than $20/day in other parts of the world -- said another way, that's what the work is worth -- the good news is that those who have world-class skills (e.g., surgeons, film stars, & professional atheletes) are likely to see their wages increase dramatically during that same period -- also, equities are likely to payoff handsomely during the coming decades -- overall, life is grand for those with discipline and an above average head on their shoulders.

Regarding the warmongers in the US government, you might want to take note of the fact that the US has been "at war" somewhere in the world since the early 1940's (about 75 years now) -- so yes, everyone in government is essentially a warmonger -- we live in a military-industial empire -- look around -- only warmongers get elected if you haven't noticed -- Mitt Romney will fit right in with his warmonger Republican and Democratic predecessors -- the only question that remains in my mind is how to make money through the predicable behavior of the warmongers who run the US -- you see, predicting the market is easy if you just watch what's happening every day...

PDI have long predicted a major stock market rally when the evidence reaches critical mass of an Obama defeat in November, regardless of who he losses to. Romney, Santorum, or Donald Duck, it doesn't matter, the market will rally if Obama stands a 60% chance or better of defeat. Simply taking the large foot of the government off the throat of the economy will be enough to ignite get a couple years of above trend growth.

Scott what makes you think that the skill to run a business are the same as those for running a nation? Also Bain & Co didn't so much run business but buy and sell businesses -- not really the same thing

I hope your right Scott. I don't have a lot of confidence in the RNC. Karl Rove still seems to have a lot of influence on the RNC. Over the last 20 years the Republicans have been "The Gang Who Couldn't Shoot Straight".

Ed R.-I will take liberties in responding to your invitation to our host to name the top three things Romney should do to jump start economic growth. Surprisingly (or not) what needs to be done is rather simple, although three is not enough since this administration has screwed things up so thoroughly and beyond historical precedent:1) Make the current tax regime permanent: tax uncertainty is detrimental to business planning. We can all argue over higher or lower taxes, but businesses mostly want certainty regardless of the level.2) Rein in the EPA: low-cost abundant energy from any source (coal, natgas, oil) will make our economy more competitive and increase disposable income at the consumer level. Energy policy, principally reining in EPA regulation, should encourage rapid development of all sources of energy.3) Cut gov't spending: Gov't spending is inefficient and crowds out private investment. Deficits should revert to no more than 1-2% of GDP.4) Repeal or Somehow Gut ObamaCare and Dodd-Frank: Combined these are 5000 pages of regulations that are terrifying/confounding businesses, gumming up private sector planning, and placing enormous costs on the economy. Scrap and start over.

Donny Baseball-You are right about action step #s 2-4. However, #1 should be a temporary measure. The status quo system of taxes is unacceptably complex and unfair. Romney should advocate for repeal of the 16th Amendment, income and payroll taxes and replace them with a retail sales tax with an exclusion so it is not regressive. This would expand the tax base to include the underground economy and shift taxes from production to consumption.

Most current taxpayers would have a lower total tax burden. It also eliminates $346B of tax compliance costs and the tyranny of the IRS. Congress will not do this on their own; Romney must lead.

Imported goods would have to compete with tax-free U.S. businesses and they would have to lower prices, lose market share or set up shop in the USA. Untaxing investment, savings, production and wages will create incentives that will unleash a boom the likes of which we have never seen. Rising tax receipts from higher growth would have to be exclusively applied to debt reduction or to lower the tax rate. Let the good times roll.

Frozen said, "Scott what makes you think that the skill to run a business are the same as those for running a nation?" A laughable red herring, though running a business is far, far more relevant to running a nation than being a "community organizer". Romney has, IIRC, experience as a governor of a state. BO has only had a few years of on-the-job learning. Indeed, it would be nice if he showed any sign of learning something while on this job. Instead he seems to be no more competent than he was as an academic. It's time to let someone serious take the helm.